Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2019 2020 2021 Net income $ 100,000 $ 120,000 $ 130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. 1) Compute Pell's Investment in Demers account balance at December 31, 2019, 2020 and 2021. 2) Compute Pell's equity income from Demers for the year ended December 31, 2019, 2020 and 2021. 3) Compute the noncontrolling interest in the net income of Demers at December 31, 2019, 2020 and 2021.

Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2019. Demers reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $30,000 and buildings were undervalued by $40,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on an annual review, goodwill has not been impaired. Demers earns income and pays dividends as follows: 2019 2020 2021 Net income $ 100,000 $ 120,000 $ 130,000 Dividends 40,000 50,000 60,000 Assume the equity method is applied. 1) Compute Pell's Investment in Demers account balance at December 31, 2019, 2020 and 2021. 2) Compute Pell's equity income from Demers for the year ended December 31, 2019, 2020 and 2021. 3) Compute the noncontrolling interest in the net income of Demers at December 31, 2019, 2020 and 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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